Mortgage Bonds continue their sideways pattern right near resistance with little influence to push prices higher. However, a big drop in unemployment claims were shrugged off as the Fed is back in there with both fists purchasing Bonds this morning.

The Labor Department reported that Weekly Initial Jobless Claims fell by 14K in the latest week to 289K, below the 308K expected. Claims are now at 8-year lows as the labor market continues to improve. The 4-week moving average of claims fell by 4K to 293,500, the lowest levels since February 2006. Jobless claims are a leading indicator to the health of the labor market.

Both Fannie Mae and Freddie Mac reported positive earnings in the latest quarter while continuing to repay the government bailouts during the financial crisis. The improving housing market was a key reason for the positive turnaround for the GSEs.

Technically, the 4% coupon is trading right near resistance. In the absence of a clear breakout higher, clients should be advised to lock in at current levels.